Monday, June 17, 2013

Who Could Have Seen This Coming?

Anyone not religiously devoted to Obamacare, that's who.  The only question is, was this the intended consequence of Obamacare, a stop on the road to completely-government-run medicine a la Canada and Britain?
The Patient Protection and Affordable Care Act, set to go into full effect on Jan 1., is certain to have broad-reaching impacts on the way that insurance companies sell their products to consumers. Some insurers, like Aetna  (NYSE: AET  ) , have been jockeying for position in the Medicaid arena, purchasing Coventry Health Care for $5.7 billion to take advantage of the coming Medicaid expansion. Other insurers have chosen to enter new markets and utilize the transparent state-run health exchanges being formed under the PPACA, also known as Obamacare, to expand their presence.

Over the weekend, Aetna made it very clear to consumers and the government that increasing levels of competition may not be the end result of state-run health exchanges.

On Saturday, Aetna informed California Insurance Commissioner Dave Jones that, in addition to not participating in California's health exchange, it planned to pull out of the state altogether with regard to offering individual health plans. Keep in mind that Aetna still intends to offer health plans to businesses and Medicare beneficiaries, which is where the bulk of its profits are in California, but it is nonetheless going to send 49,000 current members out into the cold (or should I say the palm trees?) to find another health plan.

If this sounds eerily familiar, it should be, because we saw very similar anti-competitive announcements from three of the nation's biggest insurers in California last month: Aetna, CIGNA (NYSE: CI  ) , and UnitedHealth Group (NYSE: UNH  ) , which all decided not to participate in Covered California, the state's health exchange.
Cue one of my Mountain West readers to tell me how awesome! Obamacare is and how I don't understand private health insurance.


MikeAT said...

Are you referring to a regular blogger on this site with, if I remember the words right, superior economic insight?

ChrisA said...

Darren, I don't believe it's quite as anti-competitive as you believe. Even outside the exchange, Cigna and UHO can only offer the equivalent of Bronze, Silver... plans. In all likelihood whomever has elected to participate in the exchange is also offering plans off the exchange so UHO & Cigna will still face competition.

It's not clear to me why Cigna and UHO would avoid offering plans on the exchange. Two reasons come to mind:

1. They don't wish to deal with Covered California (bureaucracy, exchange readiness, etc).

2. They are concerned about the risk pool that is represented by subsidized purchases that exist on the exchange. (You can only receive a subsidy for plans purchased on the exchange)

I know United is limiting their exchange participation to a small number of states (10 - 15?) and Cigna only offered individual plans in 10 states prior to Obamacare.

Darren said...

Combine this with the fact that our own government says that privately purchased plans in California's exchange will go up in price significantly, and I don't see this as some big victory for the individual. Check out the imbedded links here: